How To Read A Credit Report - A Basic Guide

Kieran wanted to get a new car and visited a Honda dealer. There was an Accord that she really fell in love with. Then was very heartbroken to learn she would not be approved for a loan. They say it was due to a couple of things on her credit report showing unpaid and defaulted. It just so happened, that Kieran recently got her credit report for another reason; however she really didn’t understand it. She knew those accounts were paid. Afterwards she called the credit bureaus and the credit report was changed. However the Honda dealer policy is 90 days to re-apply. The Accord was soon sold. Kieran could have avoided this whole thing and got that Accord if she only understood what the credit report was saying. Then she would have quickly taken action to correct it and update it, BEFORE she applied for that car loan.

That is the purpose of this article. It will provide a basic overview of the standard credit report. It will give the reader a guide on how to read and understand their credit report.

In the United States there are only 3 main credit bureaus. Trans Union, Equifax and Experian (use to be TRW). Any other bureau which may be in your area is somehow affiliated with one of these 3 main bureaus. Also any individual, or company, who pulls your credit report, is getting it indirectly or directly from one of these three main bureaus. They are the only credit bureaus that matter in the U.S.

So now the question… How do I read my credit report?

It should not be a surprise when we tell you that all 3 of the main bureaus do their reports different. But regardless it is not a problem because all credit reports have 4 basic sections: Identity Information, Credit History, Inquires, and Public Records.

1) Identity Info: This tells the world who you are. Name, social security number, and date of birth. Names can be listed repeatedly to show each way it has been spelled in the past. If you applied for credit anywhere and they misspelled your name on the inquiry, it is going to show on your credit report indefinitely. And naturally for females you will see the maiden last name and the married last name, also if you were divorced then went back to the maiden last name, if you marred again after that, etc. It is possible you will see a lot of variations of your name in this section. What is important is that you review it closely to look for anything you definitely do not recognize.

The additional info that will be in this section is the current address, previous addresses, and telephone numbers. Also the driver’s license number, current employer, all past employers, the spouse name, etc. Any info that helps to indentify who you are

2) Credit History: This is also sometimes called the accounts list, or your trade lines. This section will list your current and active accounts as well as any credit you have had in the past that was reported to the credit bureau.

Generally, the Credit History section will list everything in the past 7 years. Many agree that the credit bureaus computers delete anything with a “date of last activity” over 7 years. For Example if you got a MasterCard in January 1996, then stopped making payments in March 2004. Then the March 2004 is the date of last activity and when the 7 years starts to count down. Later on, you decide to send in a payment in October 2007. The countdown now starts over from October 2007 which becomes the new date of last activity.

This Credit History section includes the name of the creditor and the account number. It will also include:

* Date account was opened * If the account is in your name only or if there is a co-signer * Total amount of the loan, which is listed as the high credit limit, or highest amount on the credit card * Existing balance as of date of credit report * The fixed payments each month for loans, or the minimum due each month for credit cards * The status as of the date of the credit report (open, inactive, closed, paid, etc.) * How have the payments been made on the account

How good the payments have been made on these existing accounts is really the main thing that people checking your credits is looking for. This is indicated by a two part code.

The first part of this code is a letter that is either an I or a R. The I means installment or fixed loan, these are set loans with a fixed payment amount, like signature loans, car loans, mortgages, etc. And R means revolving which is credit cards, department store cards, or line of credit, etc.

The second part of the code is a number that will be from 1 to 9. You can guess that 1 is the best which indicates no late payments and the account is current. And 9 would be the worse which indicates numerous late, partial or completely missed payments. So 1 is the best, and 9 is the worst, and then there are all the numbers in between. But in the credit world, anything other than a 1 means there was some sort of an issue with a payment.

When these codes are explained they are not that difficult to understand. People making credit decisions want to see I1 and R1. But, they still often caused questions. Some credit reports will insert plain language descriptions like typically 30 days late… never pays late… defaulted… etc.

3) Public Records: You do not want to see anything in this section. Only negative stuff that are the resort of court actions are listed in this section. Judgments, wage garnishments, bankruptcies, tax liens, etc. Something listed in this section will bring down your credit faster that anything else.

4) Inquires: Just as the name says, this section contains a list of companies that have requested to pull your credit report.

Your credit inquires and divided into two kinds. Soft inquires are from companies looking to send out promotional information to a group, or either your current creditors monitoring your account. Then Hard inquiries are the ones that you initiated yourself by applying for credit somewhere like car financing, a loan, credit card, etc.

You may have heard that a large number of inquiries can have a negative impact. That is true but it usually takes a very significant amount to effect you. A certain amount of inquires is expected and considered a normal part of life. If you are looking to buy something like a home, or car, you are expected to shop around, and two or more of these inquiries in the same 14 day period counts as just one inquiry.

As was said earlier, there are lots of credit companies who all get their information directly, or indirectly, from one of the 3 major credit bureaus. Then they all format their reports in different ways, and put things in different order. But all credit reports will have these four basic sections.

It is extremely important to know how to read your credit report. And knowing exactly what is on it is very important.

Some in the consumer credit industry estimate that as many as 80 percent of all credit reports have some kind of mistake, misinformation, or contains something that has not been updated.

If you do see a mistake or something that dose not read correctly. You will need to talk to each of the 3 bureaus. You can fax acceptable documents directly to them, like receipts or invoices. If you do not have any proof then the creditors will have to be contacted and they have 30 days to respond.

It is our hope that this information has been a benefit to you. The goal was to provide the basic information that would show anyone how to read and interpret a credit report. That is the only way to determine if it is correct, or if you need to have it fixed. If you are planning on buying a home, a car, or applying for any kind of credit in the near future, then you need to know what is on your credit before they look at it. Remember that when you request your own credit report it is never consider as an inquiry.

Consumers Info USA uses real consumer surveys, and customer feedback to reccomend the best online services. For more information about credit reports, credit scores, and a link to order your credit report, Go Now to: www.consumersinfousa.com/order_your_credit_report.html

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Written by Greg Ford on June 15th, 2010 with no comments.
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